The landscape of digital assets is quite literally shaping and transforming right before us in 2026, and it is rapidly emerging as one of the largest years of market expansion and capital formation for digital assets and fintech. This is particularly evident with the very recent release of Practice Note 1/2026: Offering of Broking Services for Digital Assets on 30 January 2026 by the Securities Commission Malaysia (“SC”). While the title of this Practice Note may appear rather self-explanatory in that it now allows the offering of broking services for digital assets, however, the broader implications may have been somewhat overlooked, particularly in terms of how this development may shift and reshape the fintech landscape and potentially serve as a key catalyst for what lies ahead.
In this article, we aim to highlight and provide 7 key takeaways to better understand how the offering of broking services for digital assets may impact and shape market expansion and capital formation within the digital asset and fintech ecosystem, together with several key nuances that fintech market players should take note of and begin preparing for.
Key Takeaway 1: Increasing Total Market Liquidity and Participation
For the longest time, it has been no secret that market liquidity and depth for digital assets in Malaysia have remained relatively thin, particularly when compared with the regional and global landscape. This is not because Malaysia fails to recognise digital assets, rather, one of the key lacunae in the market has been the absence of a clearly defined regulatory framework for the brokering of digital assets. As we know, under the RMO Guidelines, a digital asset exchange (“DAX”) operator is technically and legally an electronic platform that facilitates the trading of digital assets. However, in a complete and mature financial ecosystem, there would naturally be a need for broking services to further extend reach and encourage broader market participation in digital assets.
With the release of this new Practice Note, and kudos to the SC for taking this progressive step, it is now made clear that CMSL holders are permitted to offer broking services for digital assets. The impact of this development should not be underestimated, as it is likely to translate immediately into increased institutional participation. Through broking services offered by CMSL holders, digital assets may achieve broader capital market integration, functioning as a complementary asset class within Malaysia’s wider capital markets ecosystem, whereby institutional investors, including pension funds, family offices, and corporates, are naturally more inclined to participate when transactions are executed through familiar CMSL holders rather than dealing directly with DAX operators. Without doubt, such integration is poised to enhance capital market depth and liquidity, while encouraging new capital inflows, including foreign investment.
Key Takeaway 2: Notification Requirements for Offering Broking Services
While the Practice Note now allows CMSL holders to offer broking services for digital assets, but this is not a blanket or automatic permission.
The Practice Note makes it clear that CMSL holders intending to provide such services must (i) notify the SC of their intention prior to commencing the services, and (ii) submit a declaration in the specified format, together with validation by a third-party validator, namely an auditor registered with the Audit Oversight Board, confirming whether the CMSL holder’s operational policies and procedures comply with the relevant SC guidelines.
Although this is not an automatic approval regime for CMSL holders to offer broking services for digital assets, but the notification and declaration process is not overly complex or technical. One can appreciate the SC’s underlying intention for such notification requirements, as ultimately the inclusion of digital assets within broking services still represents a relatively new offering for most CMSL holders, therefore it is fundamental that they possess a proper and holistic understanding of the nuances involved, including the relevant compliance policies and procedures associated with digital assets. Hence, rather than serving as an obstacle or hindrance for CMSL holders, these notification requirements designed by SC are actually prudent to ensure operational readiness to promote and facilitate the sustainable growth of the digital asset ecosystem in Malaysia.
Key Takeaway 3: CMSL Holders May Source Digital Assets from Both Local DAX Operators and Offshore Platforms or Counterparties
With the introduction of broking services for digital assets, CMSL holders are now permitted to source digital assets from either local DAX operators registered with the SC or from digital asset trading platforms and other counterparties outside Malaysia. Naturally, one of the most immediate beneficiaries within the fintech ecosystem will be local DAX operators, as CMSL holders will inevitably look to them as a primary source of liquidity. It is reasonable to anticipate that demand and trading volume may increase as broader market participation begins to materialise.
However, this is not the full picture. The Practice Note also allows CMSL holders to source digital assets from offshore platforms or counterparties, provided that such entities: (i) are registered with, or regulated under, one or more foreign laws giving effect to the Financial Action Task Force recommendations relating to virtual asset service providers; and (ii) maintain risk-based Anti-Money Laundering, Countering the Financing of Terrorism and Countering Proliferation Financing (AMLCFT/PF) systems and controls that are supervised or monitored by a competent authority empowered by law to enforce AMLCFT/PF measures.
Viewed from one perspective, the ability of CMSL holders to access both local and offshore liquidity pools is likely to benefit the broader market where investors may enjoy tighter spreads and more efficient trade execution, particularly for high-volume or institutional trades, and it is no secret that pricing on local DAX platforms has not always been the most competitive globally. This expanded sourcing flexibility is expected to enhance arbitrage efficiency, drive more transparent price discovery, and improve overall pricing competitiveness. However, on the other side of the coin, local DAX operators will inevitably face greater competitive pressure from global trading platforms. This may then compel local operators to enhance their product offerings, improve pricing competitiveness, and elevate overall service standards.
Importantly, this development does not mean that foreign digital asset trading platforms may operate in Malaysia without a licence, rather, the overarching effect is that, through CMSL holders, offshore platforms may indirectly access the Malaysian market, thereby increasing competitive intensity within the domestic ecosystem moving forward.
Key Takeaway 4: Digital Asset Custodians Stand to Benefit from Increased Market Activity
The Practice Note clearly stipulates that CMSL holders must ensure that all clients’ assets, including both fiat and digital assets, are fully segregated from the CMSL holder’s own assets, properly identified, and held separately to prevent commingling and misuse. This requirement is both expected and consistent with established investor protection principles within traditional capital markets.
In addition, CMSL holders must ensure that all clients’ digital assets are held or custodised with a digital asset custodian (“DAC”) registered with the SC, unless prior written approval is obtained from the SC for the appointment of a foreign DAC. With increased market participation anticipated, another direct beneficiary within the ecosystem, beyond DAX operators, will be DACs, given the heightened demand for professional custody services.
There is, however, a subtle but important nuance that CMSL holders may appoint foreign DACs, subject to written approval from the SC. This introduces a new competitive dynamic whereby local DACs may face direct competition from established international custodians that offer global infrastructure, extensive institutional experience, and potentially more advanced security certifications and insurance coverage. To remain competitive, local DACs may then need to enhance their value proposition by improving pricing structures, expanding service capabilities, and introducing more advanced custody solutions, including automated settlement integration and institutional-grade compliance monitoring, to meet increasingly sophisticated market expectations and custody compliance requirements.
Key Takeaway 5: All Transactions Must Be Conducted on a Cash-Upfront Basis
The Practice Note makes it clear that CMSL holders must ensure that all transactions between the CMSL holder and its clients for the purchase of digital assets are conducted strictly on a cash upfront basis. More importantly, it expressly provides that CMSL holders must not: (i) provide margin or lending facilities to clients for the purpose of digital asset trading; or (ii) exercise discretionary authority over clients’ digital asset trading accounts.
One can certainly appreciate the regulatory intention behind this approach, particularly given that this is the first time CMSL holders are expressly permitted to provide broking services for digital assets. As such, the framework understandably adopts a conservative stance, with credit, margin, and lending features deliberately excluded at this stage. Nevertheless, as the market matures, we certainly hope there may be scope for a broader range of capital market services and offerings, including margin trading, leverage products, options, futures, CFDs, and other structured instruments, to gradually extend into the digital asset space. For now, the introduction of broking services on a cash upfront basis represents a prudent and structured starting point by the SC, and with increased market maturity, it is reasonable to anticipate and hope that additional services under the Capital Markets and Services Act 2007 may progressively become applicable.
Key Takeaway 6: Broking Services Apply Only to Digital Assets That Have Obtained Concurrence of the SC
While CMSL holders are now permitted to offer broking services for digital assets, this does not equate to an unrestricted or open-ended framework. CMSL holders may only facilitate trading in digital assets that have obtained concurrence from the SC. In practical terms, this means that although CMSL holders may source digital assets from offshore platforms or counterparties, they are not permitted to broker all available digital assets, only those that have received the SC’s concurrence.
This requirement serves as an appropriate quality control mechanism, helping to reduce exposure to fraudulent, speculative, or low-quality digital assets. Given the inherent volatility and evolving nature of the digital asset market, the concurrence requirement strengthens investor protection while enabling more effective monitoring of market conduct and systemic risk. Ultimately, it reinforces a measured and responsible expansion of Malaysia’s digital asset ecosystem.
Key Takeaway 7: Direct Influence on the Future Growth of Malaysia’s Broader Digital Asset Ecosystem
The introduction of broking services for digital assets must also be viewed through the wider lens of Malaysia’s evolving fintech and digital asset landscape. With the increasing emergence of tokenised capital market products, whether structured as digital twins or native tokens, there is a clear and growing need for deeper market expansion and stronger capital formation across the digital asset ecosystem. This extends beyond cryptocurrencies to include digital currencies and tokenised securities within a broader, integrated capital market framework.
As fintech continues to mature, the availability of broking services through CMSL holders will become increasingly essential to support accessibility, liquidity, and institutional participation. Far from being a mere incremental development, this initiative may well be seen as a significant and progressive catalyst introduced by the SC, one that aligns Malaysia with the broader global movement towards tokenisation and digital asset innovation. It signals a strong foundation for the continued evolution of Malaysia’s digital economy, and there is every reason to be optimistic about the further regulatory and market developments that may follow in the years ahead.
Conclusion
The release of this Practice Note is truly more than a regulatory update, rather, it represents a quiet yet decisive shift as Malaysia begins to reimagine the role of digital assets within its broader capital markets architecture. Through this Practice Note, the SC has effectively laid the groundwork for deeper liquidity, stronger institutional confidence, and a more sophisticated market structure. This development will certainly serve as a crucial stepping stone towards more advanced capital market instruments, broader tokenisation initiatives, and meaningful cross-border digital asset integration.
Therefore, fintech players and capital market participants alike should begin positioning themselves thoughtfully and strategically for what lies ahead, as the evolution of Malaysia’s digital asset ecosystem continues to gather pace and momentum.
The Technology Practice Group of Halim Hong & Quek continues to be recognised by leading legal directories and industry benchmarks. Recent accolades include FinTech Law Firm of the Year at the ALB Malaysia Law Awards (2024 and 2025), Law Firm of the Year for Technology, Media and Telecommunications by the In-House Community, FinTech Law Firm of the Year by the Asia Business Law Journal, a Band 2 ranking for FinTech by Chambers and Partners, and a Tier 3 ranking by Legal 500.
If you have any questions on the fintech, digital asset or tokenization, please feel free to reach out to the partners at the Technology Practice Group, Ong Johnson and Lo Khai Yi, for consultation.
About the authors
Ong Johnson
Partner
Head of Technology Practice Group
Fintech, Data Protection,
Technology, Media & Telecommunications (“TMT”),
IP and Competition Law
johnson.ong@hhq.com.my
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Lo Khai Yi
Partner
Co-Head of Technology Practice Group
Technology, Media & Telecommunications (“TMT”), Technology
Acquisition and Outsourcing, Telecommunication Licensing and
Acquisition, Cybersecurity
ky.lo@hhq.com.my.
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